Reaching The Light At The End Of The Tunnel

A breakfast meeting with a well respected shipping analyst from an investment bank this week was filled with pleasant surprises. Among which is the growing interest of institutional investors in the container shipping sector. “Last year, I can count with my fingers the number of institutional investors who agreed with my view that there is significant capital appreciation for containers. Now, not many disagree with me,” he relayed. Quick reviews on the market reports available on the sector appear to be supporting his observation.

A headline from the latest Alphaliner Weekly Newsletter reads: “Container freight rates on the main export trades out of China have risen by 24% over the last three months, providing some relief for shipping lines as they seek to return to profitability in 2010. The rate of recovery is much faster than expected, although rates on some of the short-sea sectors are still depressed.” Analysts at DnB NOR sounded optimistic, albeit more cautiously. They recognized the growth in world GDP over the next few years and operators’ ability to control capacity but at the same time, warned that the size of the idle fleet could overshadow demand. CIMB in Malaysia expects the carriers in the Transpacific Stabilization Agreement to attempt another round of increase during the May/June negotiations and believes that Asia-Europe spot rates are now profitable for most carriers. And perhaps, our friend is the most bullish among them all, maintaining his view that containers could surprise by posting incremental profits in the second half of this year.

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